Income (+0.3%) and spending (+0.4%) patterns remained upbeat in June, but erosions in consumer confidence (116.5) and Chicago PMI (38%) suggested that the economy is still groping for a bottom. Though some economists held fast to median expectations of NAPM data at 44.7%, which will be released on Wednesday, the risk may be lower.
Month-end and technicals played a role too, as the decisive break below 3.8% yield (on closing basis) sent shorts scrambling again when 3.77% Oct. 1998 lows approached. The September bond blew through offers at 103-30 as the short-squeeze gained momentum, grasping the 104-handle into the close. Inaugural one-month bills were the belles of the ball amid the deflationary global backdrop, awarded at 3.59%.